The primary securitization market is off to a strong start for the week with the launch of over $1.6 billion of auto-related securities. BMW plans to issue its first auto loan deal and Nissan plans to issue a transaction backed by auto leases.
BMW has been quite active in the market this year, even issuing its first securitization of Chinese auto loans. But BMW Vehicle Owner Trust 2014-A is its deal first this year backed by retail auto loans.
RBC Capital Markets has been mandated to lead the deal.
The trust will issue $750 million of securities that have been assigned preliminary ratings by Fitch Ratings. The class A-1 money market notes will be rated F1+’. Three tranches of AAA’ rated notes are also offered: the class A-2 notes have a final maturity date of April 25, 2017; the class A2 notes are due Nov. 26, 2018 and the class A4 notes are due Feb. 25, 2021.
The pool is comprised of retail installment sales contracts secured by new and used BMW and MINI automobiles and light trucks, and motorcycles. Borrowers in the pool look strong compared to prior BMWOT transactions. For example, the pool scored an average FICO of 759, according to Fitch.
However the number of new vehicles in the pool has decreased from the issuer’s last securitization. According to Fitch 61.6% of the 2014-A pool is comprised on new vehicle loans. By comparison, new cars made up 76.9% of 2013-A pool.
Fitch noted in the presale that the pool of used cars is comprised of certified pre-own vehicles, which tend to perform better than traditional used vehicle contracts.
BMW is also including more, longer-term loans in the deal. Fitch said that loans with more than 60 months make up 41.31% of the pool, up dramatically from 16.21% in 2013-A. Longer-term loans can be exposed to higher loss severity because “loan amortization trails vehicle depreciation,” stated Fitch.
Nissan is marketing $892.8 million of securities backed by pool of closed-end vehicle leases on new Nissan and Infiniti brand vehicles. Barclays is the lead underwriter in the deal.
Nissan Auto Lease Trust 2014-B will offer $98 million of money market notes that are rated F1+’ by Fitch. The rating agency assigned preliminary AAA’ ratings to three additional tranches to be offered by the trust: the $315 million class A2 notes are due April 17, 2017; the $235 million class A3 notes are due Sept. 15, 2017 and the $102 million class A4 notes are due March 16, 2020.
The issuer priced its last lease securitization, 2014-A, in June. The 1.91-year AAA’ notes rated by Fitch priced at 24 basis points over the Eurodollar synthetic forward and the AAA’ rated notes with weighted average life of 2.29 years priced at 34 basis points over the interpolated swaps curve.
However Fitch notes in the presale report that the latest deal includes a greater number of long-term leases (terms of 49 to 60 months). These leases make up 4.5% of the pool, the largest concentration since 2008-A. The lease maturities in the pool are more concentrated in comparison to recent issuance from the NALT platform. 2014-B has 74.6% of the base residual value maturing in a one-year period between October 2016 and September 2017, decreased from the range of 61.2% to 67.4% for the prior three NALT deals.
“This pool has the large majority of its residual maturities coming due during a period in which Fitch is predicting a significant softening in the wholesale market, which will negatively affect the residual performance of this transaction,” the presale report states.